Tuesday, May 22, 2012

“There was a kind of inflection point during the five-year period between 1997 and 2003 — the late Clinton and/or early Bush administration — when all the rules just went away. You went from a period, a regime, where people did have at least some concern about going to jail, to a point where everything is legal, and derivatives couldn’t be regulated at all and nobody went to jail for anything. And looking back I would say that this period definitely started under Clinton. You absolutely cannot blame this on George W. Bush.” – Charles Ferguson of Inside Job

“I never had any money until I got out of the White House, you know, but I’ve done reasonably well since then.” Bill Clinton

On December 21, 2000, President Bill Clinton signed a bill called the Commodities Futures Modernization Act. This law ensured that derivatives could not be regulated, setting the stage for the financial crisis. Just two months later, on February 5, 2001, Clinton received $125,000 from Morgan Stanley, in the form of a payment for a speech Clinton gave for the company in New York City. A few weeks later, Credit Suisse also hired Clinton for a speech, at a $125,000 speaking fee, also in New York. It turns out, Bill Clinton could make a lot of money, for not very much work.

Today, Clinton is worth something on the order of $80 million (probably much more, but we don’t really know), and these speeches have become a lucrative and consistent revenue stream for his family. Clinton spends his time offering policy advice, writing books, stumping for political candidates, and running a global foundation. He’s now a vegan. He makes money from books. But the speaking fee money stream keeps coming in, year after year, in larger and larger amounts.

Most activists and political operatives are under a delusion about American politics, which goes as follows. Politicians will do *anything* to get reelected, and they will pander, beg, borrow, lie, cheat and steal, just to stay in office. It’s all about their job.

This is 100% wrong. The dirty secret of American politics is that, for most politicians, getting elected is just not that important. What matters is post-election employment. It’s all about staying in the elite political class, which means being respected in a dense network of corporate-funded think tanks, high-powered law firms, banks, defense contractors, prestigious universities, and corporations. If you run a campaign based on populist themes, that’s a threat to your post-election employment prospects. This is why rising Democratic star and Newark Mayor Corey Booker reacted so strongly against criticism of private equity – he’s looking out for a potential client after his political career is over, or perhaps, during interludes between offices. Running as a vague populist is manageable, as long as you’re lying to voters. If you actually go after powerful interests while in office, then you better win, because if you don’t, you’ll have basically nowhere to go. And if you lose, but you were a team player, then you’ll have plenty of money and opportunity. The most lucrative scenario is to win and be a team player, which is what Bill and Hillary Clinton did. The Clinton’s are the best at the political game – it’s not a coincidence that deregulation accelerated in the late 1990s, as Clinton and his whole team began thinking about their post-Presidential prospects.

Corruption used to be more overt. Lyndon Johnson made money while in office, by illicitly garnering lucrative FCC licenses. It was the first neoliberal President, Jimmy Carter, who began the post-career payoff trend in the Democratic Party. In 1978, Archer Daniels Midland CEO Dwayne Andreas convinced Carter to back ethanol subsidies. After Carter lost to Reagan, he faced financial problems, as his peanut warehouse had been mismanaged and was going bankrupt. AMD stepped in, overpaying for the property. But Carter wasn’t nearly as skilled as Clinton, because he didn’t stay in the club.

Over the course of the next ten years after his Presidency, Clinton brought in roughly $8-10 million a year in speaking fees. In 2004, Clinton got $250,000 from Citigroup and $150,000 from Deutsche Bank. Goldman paid him $300,000 for two speeches, one in Paris. As the bubble peaked, in 2006, Clinton got $150,000 paydays each from Citigroup (twice), Lehman Brothers, the Mortgage Bankers Association, and the National Association of Realtors. In 2007, it was Goldman again, twice, Lehman, Citigroup, and Merrill Lynch. He didn’t just reap speaking fee cash from the financial services sector – corporate titans like Oracle and outsourcing specialist Cisco paid up, as did many Israel-focused groups, Middle Eastern interests, and universities. Does this explain the finance-friendly, oil-friendly and Israel First-friendly policies pursued by the State Department under Hillary Clinton? Who knows? But if you could legally deliver millions in cash to the husband of a high-level political official, it wouldn’t hurt your policy goals.

Speaking fee money isn’t just money, it is easy money. In one appearance, for one hour, Clinton can make $125,000 to $500,000. At an hourly rate, that’s between $250 million to $1 billion annually. It isn’t the case that Clinton is a billionaire, but it is the case that Clinton can, whenever he wants, make money as quickly and as easily as a billionaire. He is awash in cash, and cash is useful. Cash finances his lifestyle. Cash helped backstop his wife’s Presidential campaign when it was on the ropes.

And these speaking fees aren’t the only money Clinton got, it’s just the easiest cash to find because of disclosure laws. Apparently, Clinton’s firm apparently had a paid $100k+ a month consulting relationship with MF Global, and Clinton and Tony Blair have teamed up to help hedge funds raise money. His daughter worked for a giant hedge fund and political ally (Avenue Capital). And Clinton has unusual relationships with billionaires and Dubai-based investors.

Bill and Hillary Clinton are the best at what they do, but they aren’t the only ones who do it. In fact, this is what politics is increasingly about, not elections, but staying in the club. Erskine Bowles, former White House Chief of Staff, lost two Senate elections. But he’s on the board of Facebook and Morgan Stanley, as well as authoring the highly influential Simpson-Bowles plan to gut Social Security and Medicare. Tom Daschle, who lost a Senate race in 2004, is a millionaire who in large part crafted Obama’s health care plan. Former Senator Judd Gregg is now at Goldman Sachs. Current Chicago Mayor Rahm Emanuel made $12 million in between his stint at the Clinton White House which ended in 2000 and his election to Congress in 2002. Former Congressman Harold Ford, now at Morgan Stanley, is routinely on TV making political claims. Larry Summers is on the board of the high-flying start-up Square. Meanwhile, Russ Feingold, a Senator who did go after Wall Street, is a professor in the Midwest. Eliot Spitzer is a struggling TV host and writer.

In other words, Barack Obama and his franchise are emulating the Clinton’s, and are speaking not to voters, but to potential post-election patrons. That’s what their policy goals are organized around. So when you hear someone talking about how politicians just want to be reelected, roll your eyes. When you hear an argument about the best message or policy framework to use for reelection, stop listening. That’s not what politicians really care about. Elections in many ways are just like regular season games in basketball – they are worth winning, but it’s not worth risking an injury. The reason Obama won’t prosecute bankers, or run anything but a very mild sort of populism, is because he’s not really talking to voters. He just wants to be slightly more appealing than Romney. He’s really talking to the people who made Bill and Hillary Clinton a very wealthy couple, his future prospective clients. We don’t call it bribery, but that’s what it is. Bill Clinton made a lot of money when he signed the bill deregulating derivatives and repealed Glass-Steagall. The payout just came later, in the form of speaking fees from elite banks and their allies.

Ironically, Clinton has come to express regret about deregulating derivatives. He has not given the money back.